The Finance Ministry has forwarded a draft of the Direct Taxes Code (DTC) Bill to the Law Ministry, it is learnt.

The Government is looking to introduce the Direct Taxes Code Bill in the monsoon session of Parliament.

The Central Board of Direct Taxes (CBDT) has so far not firmed up the tax rates that would form part of the proposed Bill.

Also, no final view has yet been taken on the proposed new tax treatment of capital gains, official sources said.

Indications are that the rates and the taxation regime for capital gains would be finalised only when the Bill is taken for Cabinet approval.

Taxation system

The revised discussion paper on the Direct Taxes Code, released last month, had sought to revamp the system of taxation of capital gains.

Under the proposed regime, for listed equity shares or units of an equity oriented fund held for more than a year, capital gains would be computed after allowing a deduction at a specified percentage of capital gains without any indexation.

The adjusted capital gain would be included in the total income of the taxpayer and will be taxed at the applicable tax rate.

The loss arising on transfer of such asset held for more than one year will be scaled down in a similar manner.

All this would imply that there will be a shift from the current nil rate of tax on listed equity shares and units of equity oriented funds held for more than one year.

For taxation of capital gains arising from transfer of investment assets held for more than one year (other than listed equity shares or units of equity oriented funds), the base date for determining the cost of acquisition will now be shifted from April 1, 1981 to April 1, 2000.

As a result, all unrealised capital gains on such assets between April 1, 1981 and March 31, 2000, will not be liable to tax.

The capital gains will be computed after allowing indexation on the raised base.

New direct taxes code

Meanwhile, the Finance Minister, Mr Pranab Mukherjee, said on Saturday that the new Direct Taxes Code was at the final stage of drafting.

He said that the new DTC was a major attempt to rewrite the existing direct tax laws.

It will simplify, rationalise and consolidate the laws and procedures relating to direct taxes. The DTC will provide a taxation regime which is simple and broad based leading to lower tax rates, better tax compliance and reduced litigation. The simplified direct tax laws will also provide a conducive environment for investment and will make India an attractive destination for foreign investors, Mr Mukherjee said.